Warrant of payment

In financial transactions, a warrant is a written order from a first person that instructs a second person to pay a specified recipient a specific amount of money or goods at a specific time. The warrant may or may not be negotiable and may authorize payment to the warrant holder on demand or after a maturity date. Governments may choose to pay wages and other accounts payable by issuing warrants instead of checks.

In the 18th century, warrants were used by the military to authorize payments to soldiers and suppliers. George Washington, for example, signed warrants that ordered quartermasters to deliver money or acquire supplies. These warrants were used by quartermasters to issue vouchers to acquire food, supplies, munitions, clothing, transportation, etc. for the use of the American military and to maintain Washington's headquarters. Warrants could be redeemed by the army paymasters, but most often they were used like cash by the recipient. Warrants, like bills of exchange and vouchers, were often heavily discounted and depreciated in value. The fortunes of war could be traced through the discount rates on warrants, vouchers, and Continental dollars.

In the early days of the colony at Sydney Cove in Australia, the merchant Robert Campbell was one of the first merchants to attempt to trade, but lacked sufficient currency. When he first sailed into Sydney aboard his company's ship the Hunter in 1798, Campbell was forced to sell his first consignment of goods to a syndicate of military officers in return for Paymaster's Bills drawn on London, which were like warrants.

The term warrant may continue to be used broadly as an order to pay or an order to deliver goods.

In government finance, a warrant is a written order to pay that instructs a federal, state, or county government treasurer to pay the warrant holder on demand or after a maturity date. Such warrants look like checks and clear through the banking system like checks, but are not drawn against cleared funds in a checking account (demand deposit account). Instead they may be drawn against "available funds" or "out of fund 0027" so that the issuer can collect interest on the float or delay redemption. If the warrant is conditional on funds being available, the warrant is not a negotiable debt instrument. In the U.S., warrants are issued by government entities such as the military and state and county governments. Warrants are issued for payroll to individual employees, accounts payable to vendors, to local governments, to taxpayers receiving tax refunds, to recipients of unemployment benefits, and to owners of unclaimed money. A warrant differs from a check in that the warrant is not drawn on a checking account, is not necessarily payable on demand, and may not be negotiable.

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